North Korean Drug Trafficking: Allegations and Issues for Congress

September 14, 1999
RS20051

At least 34 documented incidents, many involving arrest or detention of North Korean diplomats,
link North Korea to drug trafficking. Such events, in the context of ongoing, credible, but unproven,
allegations of large scale state sponsorship of drug production and trafficking, raise important issues
for the Congress, the Administration, and America's allies in combating international drug
trafficking. The challenge to policy makers, is how to pursue an effective counter drug policy and
comply with U.S. law which may require cutting off aid to North Korea while pursuing other high
priority U.S. foreign policy objectives including: (1) limiting possession and production of weapons
of mass destruction; (2) limiting ballistic missile production and export; (3) curbing terrorism,
counterfeiting and international crime, and (4) addressing humanitarian needs.
U.S. aid to North Korea is currently limited to providing food and other humanitarian assistance
together with heavy fuel oil shipments under a 1994 U.S.-North Korea agreement. Reports that North
Korea may be limiting some of its food crop production in favor of drug crop production are
particularly disturbing, though the acreage in question is comparatively small. Another issue of
rising concern is the degree to which profits from any North Korean drug trafficking, counterfeiting,
and other crime-for-profit enterprises may be used to directly underwrite or free funds from
elsewhere to underwrite the costs of maintaining or expanding North Korean nuclear programs.
This report will be updated if warranted by new developments.

Order Code RS20051
Updated September 14, 1999
CRS Report for Congress
Received through the CRS Web
North Korean Drug Trafficking: Allegations and
Issues for Congress
Raphael Perl
Specialist in International Affairs
Foreign Affairs and National Defense Division
Summary
At least 34 documented incidents, many involving arrest or detention of North
Korean diplomats, link North Korea to drug trafficking. Such events, in the context of
ongoing, credible, but unproven, allegations of large scale state sponsorship of drug
production and trafficking, raise important issues for the Congress, the Administration,
and America’s allies in combating international drug trafficking. The challenge to policy
makers, is how to pursue an effective counter drug policy and comply with U.S. law
which may require cutting off aid to North Korea while pursuing other high priority U.S.
foreign policy objectives including: (1) limiting possession and production of weapons
of mass destruction; (2) limiting ballistic missile production and export; (3) curbing
terrorism, counterfeiting and international crime, and (4) addressing humanitarian needs.
U.S. aid to North Korea is currently limited to providing food and other
humanitarian assistance together with heavy fuel oil shipments under a 1994 U.S.-North
Korea agreement. Reports that North Korea may be limiting some of its food crop
production in favor of drug crop production are particularly disturbing, though the
acreage in question is comparatively small. Another issue of rising concern is the degree
to which profits from any North Korean drug trafficking, counterfeiting, and other crimefor-profit enterprises may be used to directly underwrite — or free funds from elsewhere
to underwrite — the costs of maintaining or expanding North Korean nuclear programs.
This report will be updated if warranted by new developments.
Background. Allegations of North Korean drug production, trafficking, and crimefor- profit activity have become the focus of rising congressional attention. On October
28, 1997, Senators Grassley and Helms sent a letter to Secretary of State Albright,
questioning why North Korea was not included in the Department’s annual International
Narcotics Control Strategy Report [INCSR]. They noted that press reports indicated
North Korea’s 1995 opium production level was 40 metric tons [roughly comparable to
Mexico’s]—an amount clearly over the 1,000 hectare threshold for designation as a major
Congressional Research Service ˜ The Library of Congress
CRS-2
illicit drug producing country.1 More recently, on March 5, 1999, Representatives Gilman,
Armey, Hyde, Cox, and Knollenberg sent a letter to Special North Korea Policy
Coordinator, William J. Perry, which stressed that his policy report to the President should
address [among other key policy points] the issue of North Korean narcotics production
and trafficking.
The provisions of the Foreign Assistance Act of 1961 referred to above require that
countries cultivating 1,000 hectares or more of illicit opium poppy be subject to annual
[March first] drug reporting and certification procedures and that certain aid be withheld
and discretionary trade sanctions be imposed unless the President determines that: (1) the
country has “cooperated fully” with the United States or taken “adequate steps” on its
own to curb drug trafficking and production; or (2) “vital national interests” require
provision of assistance.2 Also prohibited is assistance to “any individual or entity
[emphasis provided] that the President knows or has reason to believe...has been a
knowing assistor, abettor, conspirator, or colluder in the illicit trafficking in any such
[controlled] substance.” Notably, the Act permits exceptions to restrictions on furnishing
assistance when the President determines that providing assistance is “important to the
security interests of the United States. International disaster assistance [such as the food
aid received by North Korea] is specifically exempted from all limitations on providing
assistance under the Act.3
U.S. foreign aid to North Korea is severely restricted because of North Korea’s
designation by the U.S. Secretary of State as a country that has “repeatedly provided
support for acts of international terrorism.”4 Assistance is currently limited to humanitarian
assistance (food) and petroleum assistance, i.e. heavy fuel oil for electrical generating
capabilities as an alternative to nuclear generation of electrical power, negotiated in
response to serious concerns that North Korea was developing a nuclear weapons
capability. In Fiscal Year 1998, North Korea received $183.4 million in food assistance
and an additional $215 million thus far for FY1999. U.S. petroleum assistance to North
Korea had a dollar value of $58 million in 1998 and is set at $31.5 million for the year
1999.5
1
N.B. North Korean climate and soil are relatively inhospitable to poppy cultivation and fertilizer
is in short supply. Best guess U.S. government estimates are that such conditions would yield
roughly the equivalent of 10 kilogram of opium gum per hectare with 40mt of raw opium
indicative of 3,000 to 4,000 hectares of poppy cultivation.
2
P.L. 87-195 as amended, Sections 481(e)(2), 489, and 490. See CRS Report 98-159, Narcotics
Certification of Drug Producing and Trafficking Nations: Questions and Answers.
3
Id., Sec. 487. Implementing regulations became effective in fall, 1998. See also, Sec. 614 “Special
Authorities”and Sec 491 (b).
4
See CRS Issue Brief 95112, Terrorism, the Future, and U.S. Foreign Policy.
5
Prior to October 1998, humanitarian assistance was allocated under Title II of P.L. 480;
subsequent food assistance falls under sec. 416 of the Agricultural Act of 1949, P.L. 81-439. Fuel
assistance for FY1999 is funded in the Foreign Operations provisions of P.L. 105-277 with some
restrictions lifted pursuant to a presidential waiver under Section 614 (a) (1) of the Foreign
Assistance Act of 1961. See Presidential Determination 97-21, 62 F.R. 23939.
CRS-3
According to South Korean sources, North Korea’s legal exports are expected to
decline by 42.5% in 1998 to $520 million from $904 million in 1997, while imports will
decrease 23% from $1.27 billion to $980 million6, exacerbating the nation’s already dire
need for hard currency. Among other things, hard currency is required to meet the
maintenance costs of North Korea’s nuclear program which according to an informal
interagency consolidated estimate approximates $200 million per year at current levels7.
Allegations of Drug Trafficking. The Department of State’s March 1, 1998
INCSR8 , includes information on North Korea in its money laundering section which
reads in part as follows: “The most profitable lines of state- supported illegal businesses
remain drug trafficking, gold smuggling, illegal sale and distribution of endangered species,
trafficking of counterfeit U.S. currency, and rare earth metals.... North Korean officials
appear to be increasing their involvement in financial crimes as a means to generate
operational funds and support their country’s anemic economy.” The 1999 INCSR reads
in part, “as the reports [on DPRK drug activity] multiply and the incidents cumulate it
seems more likely than not that the state itself is involved in criminal activity. For
example, alleged large scale opium cultivation could likely not be undertaken without the
explicit knowledge of the North Korean government. The same could be said of large
scale imports of ephedrine, a known precursor chemical for methamphetamine.”
Concerns over North Korean drug production and trafficking are also expressed in
the 1997 Report of the International Narcotics Control Board [INCB]. The Report, in
circumspect language common to such U.N. documents, notes that “The Board has
received disquieting reports on the drug control situation in the Democratic People’s
Republic of Korea. Therefore, the Board expresses its concern that the government of the
Democratic People’s Republic of Korea has not yet accepted its proposal, originally made
in 1995, to send a mission to that country to study and clarify drug control issues.”9
U.S. Drug Enforcement Administration (DEA) data and a plethora of domestic and
foreign press reports portray an ongoing pattern of drug trafficking, trafficking of
counterfeit U.S. currency10, and other smuggling-for- profit activities by North Korean
diplomats over the past 24 years. Since 1976, North Korea has been linked to over 34
verifiable incidents involving drug seizures in at least 14 countries. A significant number
of these cases has involved arrest or detention of North Korean diplomats or officials. All
but four of these incidents have transpired in the 1990’s with 10 incidents occuring from
6
Seoul Yonhap (Semiofficial News Agency of the ROK) Nov. 20, 1998, citing the Korea Trade
Investment Promotion Agency. The 1998 CIA World Factbook lists the value of the DPRK’s
exports in 1996 as $912 million.
7
Data provided CRS, January 1998. This figure is relatively low because of minimal labor costs
and the assumption of North Korea’s adherence to the Agreed Framework to freeze its nuclear
program.
8
Id, page 623.
9
INCB Report for 1997, p. 17.
10
E.g., the 1998 INCSR, p. 623, cites a February 1997 Izvestia article on the arrest of a third
secretary of the North Korean Embassy who was apprehended attempting to exchange counterfeit
U.S. dollars. Russian officials tied him to a smuggling operation designed to sell more than
$100,000 in counterfeit U.S. bills which they believe was his main function at the embassy.
CRS-4
January 1998 to September 1999. In 1999, substantial seizures of North Korean
methamphetamine occurred in Japan, South Korea, and Taiwan. 11
Press reports citing North Korean defectors and South Korean intelligence sources,
as well as U.S. government investigative agency source material, paint a grim picture of
an anemic economy in North Korea, held back by disproportionate military spending,
dysfunctional economic policies and the consequences of a broad economic and trade
embargo led by the United States since the Korean War. Pressed for cash, and perceiving
its vital national security at stake, the regime reportedly created an office to bring in
foreign currency: “Bureau No. 39,” under the ruling Korean Worker’s Party which is
headed by North Korean Leader Kim Jong Il. 12 This office is reported to be in charge
of drug trafficking and according to some reports all crime-for-profit activity including:
(1) opium production and trafficking; (2) methamphetamine production and trafficking;
(3) counterfeiting; and (4) smuggling. Drugs are reportedly exported through China and
Russia to Asia and Europe via government trading companies, diplomatic pouches, and
commercial cargo. Money earned is reportedly used to: (1) buy loyalty from Party elites
and military leaders to Leader Kim Jong Il; (2) fund costs of overseas diplomatic missions;
and (3) finance national security activity — especially technology and electronic
purchases for the intelligence and military services.13
Farmers in certain areas reportedly are ordered to grow opium poppy, with
cultivation estimates of 4,000 hectares for the early 1990’s and 7,000 hectares for 1995.
Current production, however, is believed to be below 1995 figures because of heavy rains
and the broad decline of agricultural output as a consequence of poor policies, and
insufficient fertilizer and insecticides. Looking at all available estimates, a cultivation
estimate of 3000-4,000 hectares for 1998 would appear reasonable, but nevertheless based
on indirect and fragmented information. U.S. government investigative agency sources
11
E.g, May 1976, 400 kg hashish seized from a North Korean [DPRK] diplomat in Egypt; July
1994, Chinese officials arrested a Chinese national on charges of smuggling 6 kg. of North Korean
produced heroin through the DPRK Embassy in China; August 1994, DPRK intelligence agent
arrested by Russian authorities for trying to sell heroin to Russian mafia group; January 1995,
Chinese officials in Shanghai seized 6 kg. of heroin and arrested two DPRK nationals, one with a
diplomatic passport; July 1998, DPRK diplomat arrested in Egypt with 500,000 tablets of
rohypnol—the so called “date rape” drug ; Jan. 1998, Russian officials arrested two DPRK
diplomats in Moscow with 35 kg. of cocaine smuggled through Mexico; Oct. 1998, German
officials arrested a DPRK diplomat in Berlin seizing heroin believed made in North Korea; and
May 1999, Taiwanese officials seized 157 kg of methamphetamine said to be DPRK produced.
12
In April 1998 Russian police reportedly arrested Kil Chae Kyong [personal secretary in charge
of secret funds for Kim Jong Il] on charges of trying to sell $30,000 in counterfeit U.S. currency.
13
See: The wiseguy regime, U.S. News & World Report, February 15, 1999; N. Korea said to be
in drug business, Washington Times, February 26, 1995, A-1; Drug trafficking by North Korean
Service, Moscow-interfaks, 22 June 1997; Kim Chong-il’s fund manager commits suicide, Tokyo
Sankei Shimbum, 29 December 1998; North Korean business: drugs, diplomats and fake dollars,
AP, May 24, 1998; Seoul says N. Korea increasing opium output for export, Kyodo, June 8,
1993; DPRK officially involved in drugs, counterfeiting, Digital Chosun Ilbo WWW, [South
Korea] November 12, 1996; DPRK defectors attest to realities of DPRK system, Seoul Tong-A
Ilbo, February 14, 96, p.5.; N.Korea accused of promoting opium farms, Seoul Choson Ilbo,
August 7, 1994, p.5.
CRS-5
estimate North Korean raw opium production capacity at 50 tons annually, with 40 tons
reportedly produced in 1995. North Korean government pharmaceutical labs reportedly
have the capacity to process 100 tons of raw opium per year.14
Methamphetamine production in North Korea is reported to have started in 1996
after heavy rains decreased income from poppy production. This coincides with a time
when markets for methamphetamine are dramatically expanding in Asia, especially in
Thailand, Japan, and the Philippines.15 North Korea’s maximum methamphetamine
production capacity is estimated to be 10-15 tons of the highest quality product for
export. According to the INCB, North Korean legitimate pharmaceutical needs for
ephedrine [a traditional precursor for methamphetamine] are 2.5 tons per year, one ton
higher than U.S. investigative agency source estimates. INCB officials confirm receipt of
allegations of North Korean involvement in a diversion of 20 tons of ephedrine.16
Moreover, the DPRK may be bypassing the highly regulated market for ephedrine in favor
of an alternate technology for a benzine based product, raising speculation that U.S. and
allied petroleum assistance to North Korea may be used to sustain illicit drug production.
Conservative estimates suggest North Korean criminal activity, carefully targeted to
meet specific needs, generated about $85 million in 1997: $71 million from drugs and$15
million from counterfeiting.17 Looking at all available estimates, a $100 million figure,
although admittedly low, falls in the general range where estimates overlap. However,
there are strong indications that the figures are considerably higher: “$500 million to $ 1
billion annually from criminal activities”.18
If credence is to be given to U.N., Department of State reporting, and DEA shared
information, as well as press reports citing North Korean defectors and South Korean
intelligence sources, a pattern of activity emerges which indicates that: (1) in the 1970’s,
North Korean officials bought and sold foreign source illicit drugs; (2) in the mid-1970’s,
North Korea began cultivating opium poppy as a matter of state policy; (3) in the mid
14
See: U.S. says North Korea sponsors drug smuggling, Kyodo News Service (Japan), December
13, 1998. Total arable land in the DPRK is estimated to exceed 1.3 million hectares.
15
In August 1998, Japanese authorities arrested members of a Japanese criminal organization and
seized 200 kg of a 300 kg shipment of methamphetamine believed manufactured in North Korea.
Earlier, in April, 58.6 kg of the same drug, thought to have been manufactured in China, was seized
by Japanese authorities in the cargo of a North Korean freighter. See: Police say seized drugs
originated in North Korea, Yomiuri Shimbun (Japan), Jan. 8, 1999.
16
For example, in January, 1998 Thai police reportedly seized, but later released, 2.5 tons of
ephedrine en route from India to North Korea. This was reportedly part of an 8 ton shipment North
Korea had attempted to purchase which the INCB reportedly limited [but formally denies limiting]
to two 2.5 ton shipments over a two year period. Pyongyang reportedly argued for the right to buy
30 tons from India— enough for a 135 year supply of cold tablets (see Bankok Times, 6/13/99,
p.6.
17
The $71 million for drugs breaks down as $59 million from opium/heroin and $12 million from
amphetamines, although one, admittedly speculative , U.S. law enforcement agency source estimate
for “world” market price of heroin produced by the DPRK in 1995 is $600 million. For the $15
million figure on counterfeiting, see: Korea Herald, November 16, 1998.
18
E.g., see: U.S. News & World Report, 8/9/99, p. 31 citing estimates of “U.S. officials”.
CRS-6
1980’s, North Korea began refining opium poppy for export and exporting refined opium
products; (4) and in the mid-1990’s, after heavy rains reduced opium production in 1995
and 1996, North Korea, began manufacturing and exporting methamphetamine to
expanding markets in Southeast Asia. If this pattern reflects reality, an important question
is the degree to which the government of North Korea may respond to increased financial
pressures and expanding methamphetamine markets by dramatically increasing currently
reported levels of drug trafficking activity. Recent seizures of DPRK source
methamphetamine in Japan, Taiwan, and South Korea may well reflect such a disturbing
trend.
Some analysts, however, question the reliability of information reported in the press
attributed to North Korean defectors and South Korean government sources in the context
of what is seen as a cold war propaganda battle between the two Koreas. They note that
in a closed state such as North Korea “hard” data is difficult to obtain, thus what is
obtained is fragmentary and indirect at best. North Korea continues to dismiss media
reports and speculation on government involvement in drug trafficking activities as
slander based on politically motivated adversary propaganda sources such as South Korean
intelligence services. North Korean officials stress privately that corruption, drug use,
trafficking, and criminal activity in general are maladies to which individuals in all societies
may fall prey, and that any involvement by North Korean individuals in such activity is in
no way state-connected or state sanctioned. Further, officials have stressed that in
instances where such activity has come to the attention of authorities, individuals involved
have been duly punished. Finally, DPRK officials maintain that drug trafficking and
production are matters that should be handled, and are best handled, by their government
as internal matters. U.N. officials also point to the politically charged milieu of allegations
of drug trafficking by North Korea and point out that drug smuggling by individuals in the
diplomatic community is by no means limited to North Korea.
Issues for Congress. At least thirty documented drug trafficking incidents coupled
with credible (if unproven) allegations of large scale North Korean state sponsorship of
opium poppy cultivation, and heroin and methamphetamine production and trafficking,
raise significant issues for Congress, the Administration, and America’s allies in combating
international drug trafficking. The challenge to policy makers, is how to pursue sound
counter drug policy and comply with U.S. law which may require cutting off aid to North
Korea while effectively pursuing other high priority U.S. foreign policy objectives
including: (1) limiting possession and production of weapons of mass destruction; (2)
limiting ballistic missile production and export; (3) curbing terrorism, counterfeiting and
international crime, and (4) addressing humanitarian needs. The State Department’s first
INCSR report on North Korea was released February 26, 1999.
Central to the policy debate is the need for hard data such as satellite imagery to
confirm the extent of reported opium poppy cultivation in North Korea. Enhancing law
enforcement focus and intelligence cooperation on targeting, reporting, and tracking
North Korean opium/heroin and methamphetamine trafficking and production is another
option which warrants consideration.
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